How to Read Your Salary Slip in India: CTC, PF and Tax Explained

To read your salary slip in India, look at three blocks: earnings (basic pay, HRA and allowances), deductions (provident fund, professional tax, income tax and ESI where it applies) and net pay. Gross earnings minus total deductions gives your take-home salary. Your CTC is higher than both because it also includes employer costs.

Many people sign an offer letter based on CTC and are surprised by the first credit in their bank account. This guide explains each line on a typical payslip, what changed with the new labour codes, and what to check every month.

CTC, gross salary and net salary

Cost to Company (CTC) is the total amount an employer spends on you in a year. It includes your salary plus employer-side costs such as the employer’s provident fund contribution, gratuity provision and, in some companies, insurance premiums or a variable bonus.

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Gross salary is what you earn before deductions. It is usually CTC minus the employer’s PF share, gratuity and any benefits not paid out in cash.

Net salary, or take-home pay, is what reaches your bank account after deductions such as your PF share, professional tax and tax deducted at source (TDS).

The earnings side of your payslip

Basic salary

Basic pay is the fixed core of your salary. Many other items, including PF and gratuity, are calculated on it, so it matters more than its size suggests. It is fully taxable.

Dearness allowance (DA)

DA is mainly paid in government jobs and some public sector units to offset inflation. It is revised from time to time and is fully taxable.

House rent allowance (HRA)

HRA helps cover rent. Under the old tax regime, part of it can be tax-free if you live in rented housing, based on rules linked to your basic pay, rent paid and city. Under the new tax regime, this HRA exemption is not available.

Special allowance and other allowances

Special allowance is often the balancing figure that makes up the rest of your gross pay. You may also see conveyance, meal, phone or internet reimbursements, leave travel allowance and performance bonus. Tax treatment depends on the item and on which tax regime you choose.

What the new labour codes changed

The four labour codes, which replaced 29 central labour laws, came into effect on 21 November 2025. The Code on Wages, 2019 introduced a common definition of “wages” used to calculate benefits such as gratuity and leave encashment.

Under this definition, wages broadly mean basic pay, dearness allowance and retaining allowance. If excluded items such as HRA and conveyance together exceed 50 percent of total pay, the excess is treated as wages. In simple terms, many employers have had to raise the basic and DA portion. This can increase PF and gratuity contributions and, for some employees, slightly reduce monthly take-home pay while increasing long-term savings.

The codes also allow fixed-term employees to receive gratuity after one year of service, instead of the usual five years. Central and state rules were still being finalised after the codes took effect, so check how your employer has applied them.

The deductions side of your payslip

Employee provident fund (EPF)

Under EPFO rules, an employee usually contributes 12 percent of basic pay plus DA to the provident fund. The employer also contributes 12 percent, of which 8.33 percent goes to the Employees’ Pension Scheme, calculated on a wage ceiling of Rs 15,000 a month, and the rest goes to your PF account. Only your share appears as a deduction. The employer’s share is part of CTC.

Professional tax

Professional tax is a state tax on employment. Not every state levies it, and rates differ, but the Constitution caps it at Rs 2,500 per person per year. If you see a small fixed monthly deduction labelled PT, this is it.

Income tax (TDS)

Your employer deducts income tax every month based on your projected annual income and the tax regime you choose. The new tax regime is the default. Under it, salaried individuals get a standard deduction of Rs 75,000, and a rebate means there is no tax for taxable income up to Rs 12 lakh. Budget 2026 kept these slab rates unchanged. The old regime allows deductions such as Section 80C investments and HRA exemption but has higher rates.

Tell your employer your regime choice and submit investment proofs on time. Otherwise, more tax may be deducted than needed, and you will have to claim a refund when you file your return.

Employees’ State Insurance (ESI)

ESI applies to employees earning up to Rs 21,000 a month in covered establishments. The employee contributes 0.75 percent of wages and the employer 3.25 percent. In return, you and your family get medical cover and certain cash benefits through ESIC.

Other deductions

You may also see loan recoveries, canteen charges, voluntary PF contributions, group insurance premiums or a Labour Welfare Fund deduction in some states.

Sample payslip breakdown

The figures below are an illustration only, for a monthly gross of Rs 60,000. Actual numbers depend on your company’s structure.

Component	Type	Amount (Rs)
Basic salary	Earning	30,000
HRA	Earning	12,000
Special allowance	Earning	18,000
Gross earnings		60,000
Employee PF (12% of basic)	Deduction	3,600
Professional tax	Deduction	200
TDS	Deduction	Varies by regime
Net pay		Gross minus deductions

What to check on your payslip every month

1. Attendance and leave: paid days should match your records. Loss of pay days reduce earnings.
2. PF credit: log in to the EPFO member portal or UMANG app and confirm that both your share and the employer’s share were deposited.
3. TDS: compare monthly tax with your expected annual liability. Check Form 26AS or the Annual Information Statement on the income tax portal.
4. PAN and UAN: make sure both are printed correctly. Errors can delay tax credits and PF transfers.
5. Arrears and bonus: one-time payments should appear as separate lines so you can track them.

At the end of the financial year, your employer issues an annual TDS certificate, long known as Form 16, which you use to file your income tax return.

For more on money matters, read our finance section. Job seekers and freshers may also like our education coverage.

Frequently asked questions

Sources: Employees’ Provident Fund Organisation, Income Tax Department, Ministry of Labour and Employment, ESIC.